Correlation Between Compania and Southern Copper

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Can any of the company-specific risk be diversified away by investing in both Compania and Southern Copper at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Compania and Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania de Minas and Southern Copper Corp, you can compare the effects of market volatilities on Compania and Southern Copper and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Compania with a short position of Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Southern Copper.

Diversification Opportunities for Compania and Southern Copper

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Compania and Southern is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Southern Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper Corp and Compania is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Compania de Minas are associated (or correlated) with Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper Corp has no effect on the direction of Compania i.e., Compania and Southern Copper go up and down completely randomly.

Pair Corralation between Compania and Southern Copper

Assuming the 90 days trading horizon Compania de Minas is expected to under-perform the Southern Copper. In addition to that, Compania is 1.16 times more volatile than Southern Copper Corp. It trades about -0.14 of its total potential returns per unit of risk. Southern Copper Corp is currently generating about 0.06 per unit of volatility. If you would invest  9,670  in Southern Copper Corp on September 4, 2024 and sell it today you would earn a total of  629.00  from holding Southern Copper Corp or generate 6.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy96.83%
ValuesDaily Returns

Compania de Minas  vs.  Southern Copper Corp

 Performance 
       Timeline  
Compania de Minas 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
Southern Copper Corp 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Southern Copper may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Compania and Southern Copper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Compania and Southern Copper

The main advantage of trading using opposite Compania and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania position performs unexpectedly, Southern Copper can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Southern Copper will offset losses from the drop in Southern Copper's long position.
The idea behind Compania de Minas and Southern Copper Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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